Sunday, March 17, 2013

“Ireland is not Cyprus”

We haven’t heard this beauty yet, but no doubt as the week progresses the classic “Country A is not Country B” will be rolled out. The Cypriot developments of the past few days are very significant. All bank deposits as of Friday 15th March will be subject to “an upfront one-off stability levy applicable to resident and non-resident depositors” per the Eurogroup statement.

The €5.8 billion to be raised from the levy is equivalent to 32% of Cypriot GDP (2012: €18 billion) or 8.5% of the deposits in the Cypriot domestic banking system. For comparison, 32% of Irish GDP (2012: €162 billion) would be more than €50 billion and 8.5% of the deposits in Irish banks (including IFSC) would be €21 billion.

Deposits in the Cypriot domestic banking system are 382% of GDP; the equivalent figure for Ireland is 152%. The Cypriot banks have a lot of deposits. Here is a table of Irish and Cypriot bank deposits (excluding deposits from other banks in both cases).

Around 62.5% of the deposits in the Cypriot banking system are labelled as “Resident” but the private sector numbers are “high” when compared to the Irish figures. Both Cypriot households and non-financial corporations have greater than 2.5 times more deposits in their banks relative to the Irish equivalents in GDP terms.

The population of the Republic of Cyprus is around 875,000 so the €26.3 billion of deposits from the household sector imply a per-capita figure of around €30,000. In contrast the 4.6 million population of Ireland implies a per-capita household sector deposit of €20,000. GDP per capita in Cyprus is €20,000; GDP per capita in Ireland is €35,000.

Per-capita household sector deposits in Cyprus are 150% of per-capita GDP. Per-capita household sector deposits in Ireland are 57% of per-capita GDP (or 71% of per-capita GNP). The official statistics indicate that the Cypriots have a lot of money in the bank.

Some figures on the distribution of household deposits would be great. Data through the income distribution for the median and inter-quartile range would do but it is impossible to determine that from central bank statistics.

Maybe the Cypriots do have a lot of money in the bank. The DIRT enquiry highlighted the prevalence of bogus non-resident in accounts in Ireland through the 1980s and 1990s. What odds on a prevalence of bogus resident accounts in Cyprus now? Maybe Ireland and Cyprus are not so different after all.